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Gas Prices Shift In Drivers' Favor

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By RUSSELL RAY

The Tampa Tribune

Published: August 5, 2008

TAMPA - Motorists have been given a reprieve from skyrocketing gasoline prices, the result of the declining cost of oil and a dive in demand.

Talk of gasoline rising to $5 a gallon this summer has faded, with regular unleaded averaging $3.84 a gallon in the Tampa Bay area, down 17 cents from the high of $4.01 on July 16, according to AAA. Prices at some Bay area stations were below $3.70 a gallon Monday, according to Gasbuddy.com, which tracks gasoline prices in markets nationwide.

High fuel prices, a sour economy and a surging unemployment rate have forced motorists to cut back on driving. Industry observers say efforts to lift the ban on offshore drilling have contributed to a sharp drop in oil prices.

Crude oil, the feedstock for nearly all transportation fuels, closed Monday at $121.41 a barrel, 16 percent lower than the record high of $145.29 a barrel on July 3.

"This is the new trend of the market," said James Cordier, president of Liberty Trading Group, a futures brokerage firm in Tampa. "We've had complete demand destruction in the United States as well as in Europe with the changing of driving habits and the grounding of airplane fleets."
Cordier predicted that pump prices in the Bay area will average $3.75 a gallon by Labor Day.

"High prices did their job," Cordier said. "Now we see traders betting on the down side."

AAA spokesman Randy Bly said gas prices probably will keep falling this week.

Beyond that, prices could change direction quickly, especially if Tropical Storm Edouard turns into a major hurricane in the Gulf of Mexico, home to significant oil production and processing.

The National Hurricane Center issued a hurricane watch Sunday for the coast of western Louisiana and eastern Texas, which means hurricane conditions are possible. The Houston Ship Channel was closed as a precaution.

Also, escalating tension between the West and Iran could keep prices from falling further. The Bush administration said Monday the five permanent members of the U.N. Security Council and Germany have agreed to pursue further sanctions against Iran over its nuclear program after it failed to meet a weekend deadline to respond to an incentives package.

Several factors have caused prices to plunge, including a 5.7 percent unemployment rate in July, the highest in four years, Bly said.

"That is partially because of employers struggling with high energy costs to run their businesses," he said.

Barring a major hurricane, oil will likely settle below $120 a barrel, Bly said. Prices briefly dipped below that level Monday.

"You can't ignore the tremendous decline in the demand for crude oil and gasoline," he said.

Nationally, the price of regular unleaded is averaging $3.88 a gallon, down from $4.10 a month ago, according to AAA.

"We see demand coming down steadily over the next few quarters," Cordier said.

Lower pump prices are welcome news for consumers, but it won't stop the U.S. economy from getting worse, Cordier said. Although gas prices have fallen in the Tampa Bay area, they are still 39 percent higher than this time last year.

"This will ease the pain slightly," he said. "But there's so many deeply embedded problems in the financial system and the credit markets and housing."

Information from The Associated Press was used in this report. Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com.

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